Once known as "prefabs," these apartments represent a radical
departure from conventional brick-and-mortar building.

Each apartment is constructed in a UK factory, shipped to site by
lorry, then assembled in around twenty weeks - less than half the
time it takes to build a traditional development.

Modular homes are not new in the UK. They had a heyday in the
1960s but fell out of favour, with a reputation for poor build
quality and ugliness. Now, just 2,000 are built each year in the
capital.

But offsite manufacturing has come on a long way since then, and
the Greater London Authority - which has oversight for land
planning - thinks it could be a solution to London's housing
crisis. A
report in August touted modular homes as a "way to close the
gap" between supply and demand in the capital.

The report's author Nicky Gayron said modular homes had important
benefits over traditional ones.

"These buildings are high quality and outstanding in terms of
performance," she said.

"Their construction is more environmentally-friendly than
traditional construction methods and they are a far cry from
their prefabricated predecessors."

Innovative solutions are badly needed. The GLA estimates that
London needs 50,000 homes built a year just to sustain population
growth, less than half of what's currently built. But are modular
homes the answer?

To their cheerleaders, modular apartments Pocket's - which
currently account for about 35% of the firm's construction output
- could be an important fix for a London market marred by decades
of runaway price growth. To qualify to buy a Pocket home, owners
must be first-time buyers, earn less than £90,000, and already
work or live in the same borough.

Low construction costs and their small size mean they are classed
as "affordable," too, capped at 80% of the average market price
in a given borough.

caption

Living room in Pocket's Sail Street SE11 development

source

Pocket Living

To their
detractors, so-called "micro-homes" are the last thing London
needs. Writing in
the Guardian last week, sociologist Lisa Mckenzie said Pocket
Homes were unaffordable for most, as a price tag of £350,000 to
£400,000 means a person would need that £90,000 income just to
secure a mortgage.

Pocket's sales director Lucian Smithers says this is not the
case. He says the average income of a Pocket owner is £42,000 -
slightly above the London average and the average buyer age a
relatively low 32.

"We didn't get into business to sell to people who are earning
£85,000 a year," he said.

"It's a combination of what consumers want, and can afford, along
with the protections that belong to the affordable housing
sector," he told Business Insider.

And what about their size? One-bedroom apartments measure just 38
square metres, roughly the size of a London tube carriage. Do
people really want to live in a space that size?

The answer appears to be a resounding yes: 35,000 Londoners are
currently on the waiting list for a Pocket home.

Smithers said the debate around space is familiar. "A lot of the
demand for smaller housing is looked at as historical shrinkage
of household sales, and the implication is a fall in quality: a
fall in quality of product and quality of life," he said.

"But a few things are left out of that debate. The drive towards
the city as a cultural and business hub has increased since the
millenium. With that has come a big shift in the way 20- and
30-somethings live.

"They're more transient, and typically live in very insecure,
expensive rental accommodation. They are children of the
internet. They have everything in the cloud. They read books on
the Kindle and their music is stored on their laptops.

"They want to be proximate to the cultural hubs of the city, and
they want to live in the city: Not have a garden, a large
balcony, or a flat that drains their lifestyle in cost," he said.

"The debate around space is a very difficult one and it's very
fraught, but I hope we can have a more nuanced debate around
space and the benefits of allowing one-person households to
form," he says.

The main advantage of modular construction, Smithers says, is the
speed of on-site construction.

"There aren't many small- and medium-sized developers out there,
and getting your capital out so you can recycle it as quickly as
possible is critical," he says.

"Shaving a third off construction time is incredibly useful."

He has an interesting theory as to why the government is so
interested in modular housing.

"It's well-documented that [post-Brexit labour shortages] are a
major concern," he said.

"The government's very interested in modular housing because it
can spread the load in terms of bringing in factories outside the
south-east of England to ones that are in the Midlands and the
North."

In theory, spreading labour outside the south-east - where the
majority of construction workers are European - could reduce the
impact of labour shortages.

But Smithers warns that may not solve the problem. "Our
experience is that labour in the factories [outside the
south-east] is still predominantly European," he says.

Unlocking London's airspace

Another developer making inroads in the modular sector is Apex
Housing. Its business model is rather startling: it builds homes
on top of existing ones. Ideally, the roof of the existing
building is flat, but pitched roofs aren't a problem either.

Apex simply removes the pitched roof, installs an extra layer of
housing, and puts the roof back on.

Val Bagnall, Apex's business development director, told Business
Insider that the firm has identified £54 billion of development
potential on London's roofs, both on top of retail spaces and
privately owned residential buildings.

Business Insider sat down with Val Bagnall, Apex's business
development director, at property conference Resi Conf last week.

"People are still unaware of the value that sits above them," he
said. "We're trying to unlock the market."

Apex's pitch to the freeholder is roughly the same as a
conventional development: the firm offers around 25% or 30% of
the total sales value of the resulting units.

It is also in talks with Tesco to develop on the flat roofs of
the supermarket's buildings. Bagnall believes Tesco's London
roofs alone could have £400 million of development potential.

Apex has built only built two single units to date, but earlier
this year signed a deal to build 28 flats above a building in
Southwark, 11 of which will be "affordable." Watch this space.